An Overview of the Indian Logistics Sector

The logistics industry in India is highly fragmented and dominated mostly by small, regional players. However, in recent times, owing to the rise in demand for logistics services, this sector is witnessing considerable transformation. According to PriceWaterhouse Coopers, this industry is experiencing a CAGR of 8%, mostly due to the boom in Indian economy that has led to a rise in disposable incomes and greater industrialization efforts across the country.

The traditional element of logistics has been transportation of goods, but as industrialization flourishes, logistics now covers additional services like 3PL, cold chains, and warehousing as well. There are essentially ten strategic growth areas within the Indian logistics sector:

Air cargo logistics

Cold chain / cold storage

ICD / CFS

Third-party logistics (3PL)

Road transport service

Shipping

Warehousing

Logistic parks

Relocation

Courier

Opportunities For The Relocation Sector

India is one of the world’s fastest growing economies, and as such offers development opportunities across multiple industries. This boom also has a positive impact on the logistics sector as it is faced with newer opportunities for increasing revenues.

Industrial development also has an indirect impact on this sector as it helps increase the country’s GDP and spending potential, giving rise to more consumers who require logistics services in some form or the other.

The future of the Indian industry is definitely promising in terms of growth prospects, also due to growing trade relations with other countries.

Challenges and What Needs To Be Done

Even though there are ample areas of growth for new and existing players in the industry, the Indian logistics sector faces several challenges that impede development.

According to data from Logistics in India and SSKI, the country’s spend on logistics – 13% of its GDP, is significantly higher in comparison with that in the developed nations.

This is primarily due to inefficiencies like poor infrastructure support, higher number of administrative delays resulting in higher turnaround times, indirect taxing policies, etc. Moreover, the sector is highly fragmented, with the majority of players lacking capital to become more professional and advanced, but at the same time, offering intense competition to new entrants.

New players in the industry also require significant amount of capital investment as most of the industry is extremely asset intensive.

To further help develop the logistics sector, which is an essential backbone to almost all other industries and sectors, the government needs to make significant investment to improve the overall infrastructure across rail, road, airports, and sea ports. In addition, it should also introduce fair amount of regulations to monitor the quality of service being offered by players to further improve the sector.